Chapter 1 - Assessing the Environment - Political, Economic, Legal, Technological

What are the 3 economic centers?

(1) NAFTA (2) The European Union (EU) (3) ASEAN

International Environment as Challenges

(1) National Culture (2) Political Environment (Govt.) (3) Economic Environment (4) Legal Environment (5) Technological Environment (6) Other (Languages, Religions, Natural Disasters)

Poverty Head Ratio

$1.25/day (0-81%)

Auto Market in India

(1) 1.1 billion population (in 2008) (2) GNI per capita: US $1,070 (3) Tata Motors launched its People's Car, "Nano" with a sticker price of US $2,160.

ASEAN

(1) 10 countries (2) 623 million ~ 3,432 mil. when China, Japan, Korea, & India are included (3) GNI -Total: $2.5 trillion ~ $21.3 trillion when the above countries are included -Per Capita: $4,071

EU

(1) 28 member countries (2) 508 million population (3) GNI -Total: $18.1 trillion -Per Capita: $35,673

NAFTA

(1) 3 countries (2) 478 million population (3) GNI -Total: $20.7 trillion -Per Capita: $43,233

Triad

(1) 3 regions & free-trade blocs (EU, ASEA, NAFTA) (2) Grouped among 3 dominant currencies (Euro, Yen, & US Dollar) (3) Expanding their borders to include neighboring countries

Political Environment/Risk

(1) Any govt. action or politically motived event that could adversely affect a firm. (2) Role of host country govt.

Globalization

(1) Borderless world (2) Increase in exports/imports & foreign direct investment (FDI) (3) Impact on firms, consumers, employees, govt., natural environment, etc.

Other Developing Countries

(1) Central & South America (2) Russia (3) Middle East (4) Africa (South Africa) (5) BRICs, Chindia

Technological Environment

(1) Development level of technologies (e.g. information and communication technologies) (2) Protection of technology (e.g. patents)

Typical Risks of Environment

(1) Expropriation: local govt. seizes the asset of a foreign firm with inadequate compensation (e.g. Indonesia oil industry) (2) Nationalization: forced sale of equity of the foreign firm, often at/below value (3) Discrimination against foreign firms (4) Interference in management (e.g. hiring rules, censorship) (5) Terrorism (6) Economic Stability (e.g. Exchange rate, economic fluctuation (Delinquency))

What is supported by globalization?

(1) Information Technology (2) Transportation Technology (3) Global Human Resources

Civil Law

Comprehensive set of laws organized into codes, interpretation is based on reference to codes and statues (e.g. France, Germany, Japan)

MNC

Multi-National Corporation

MNE

Multi-National Entreprise (1) A firm having operations in more than 1 country.

Common Law

Past court decisions act as precedents to the interpretation of the law (e.g. US & countries w/ English origin)

PCT

Patent Cooperation Treaty

Legal Environment

The host countries legal system. (1) Common Law (2) Civil Law (3) Religious beliefs and relationships

GNI

[Gross National Income] The total value of goods & services produced within a country (i.e. its Gross Domestic Product (GDP)) (+) its income received from other countries (notably interest & dividends) (-) similar payments made to other countries